When your regular client regularly fails to pay

"I have been doing a regular piece of work every week for a client for the past few months now, and they never pay on time," one freelance contractor admitted this month.

This is scenario that, unfortunately, we here at Safe Collections are well-acquainted with. It is especially prevalent in periods of financial uncertainty and economic malaise - like right now! As companies feel the pinch in their cashflow, it is often freelancers and contractors who find themselves a low payment priority.

But there are ways to maximise your clout as a low priority creditor...

A Contractor-Client relationship is much like any other, you need to clearly define and establish the boundaries at the start. This should include defining acceptable payment terms and practices. If you have historically "allowed" your client to play fast and loose with your payment terms, getting them back on track may take some creative thinking!

Luckily for the average contractor, creative thinking should not be an issue, so let's look at your potential options.

1. Do nothing. Yes we know; this is what you are already doing and the client's lack of urgency is starting to grate on you! But you need to ensure that taking a harder line with payment will not sour the relationship you have just spent months working on. Is it a financial necessity that this client begins to pay on time? If it is not an immediate priority then it may well be more beneficial to retain the regular work and let sleeping dogs lie.
    
2. Do nothing (right now) - UK late payment legislation allows for retrospective claims on any invoice paid late for the last six years, giving contractors the ability to claim all applicable costs and interest at an as yet undetermined point in the future. This means that when/if the relationship ends, you can take a view on reclaiming the charges for any invoice paid beyond its terms at that time.

   Warning: Retrospectively adding late payment charges is rarely well received; it is highly likely to kill off any remaining good will.
    

3. Increase your price. This may be the simplest option in the circumstances. Rather than appear to be punitively adding late payment charges of £40, £70 or £100 on top of your invoice, try to renegotiate the current pricing structure to include these costs. A good way to renegotiate is to claim that you have a competing offer of 'X' (where 'X' is your current charge plus late payment costs) to provide similar services to an unnamed competitor of the client.
    
4. Offer a prompt payment discount. In reality this is similar to No 3 (above). The way it works is you increase your price by 10% but when you quote for any job, give your current (discounted) price and state that this figure includes a discount for prompt payment within 'X' days. This is especially useful for new clients but can be introduced to the more challenging existing customers in much the same way as a flat increase can.
    
5. Make friends & influence people. An old trick used by companies dealing with large 'faceless' organisations, such as local authorities and large multinationals, is to actively befriend an employee in the accounts department, with the ultimate aim of ensuring your new friend gets your invoice to the top of the payment pile. This approach is not quick or easy, but if you can build a good working rapport with a person authorised to issue payment you will save yourself a lot of running around in future. The odd box of chocolates ordered over the internet works wonders!

We cannot guarantee that any of the above will work on your existing client, after all they are now used to taking their time. If nothing else, keep in mind the client uses your freelance skills for two main reasons, service and price. Many businesses will be loath to try and negotiate new relationships with unknown suppliers, working along the old adage of "If it isn't broken, then why bother to fix it?" As a one-person, contractor business, this truism can give you the potential latitude to renegotiate agreements to your own commercial advantage.